Alistair Darling: No, and the hon. Gentleman well knows that what he is saying is absolute nonsense. The primary purpose of our intervention last October was to stop the banking system collapsing. Indeed, that is why he and his hon. Friends on the Front Bench supported us, so it is no good their now saying that they were not in favour of it and would have done something different. Of course, if there are no banks in the first place, there will be no lending, so propping them up was a precondition of getting lending going again. That is no more than a statement of the obvious.
	Since that time, there has been a substantial downturn of economies, not just here but in every country in the world. We can see that in all the forecasts and in all the figures that we know about at the present time. That is all the more reason for us to ensure that we get lending going again and help to fill the gap that has been left by foreign banks withdrawing from lending, not only in this country but in other parts of the world. It is also all the more reason for the Government to step in to help to support businesses and families.
	That approach is supported right across the world, and the Conservatives are virtually isolated as far as that is concerned. It has been backed by the independent Institute for Fiscal Studies—which is often favourably cited by the Conservatives when it suits them—and, even yesterday, the Bank of England's inflation report made the case that if Government support comes through, it will make a substantial difference to the position than would otherwise be the case. We are clear that supporting the banks and supporting our economy are absolutely essential, and I am sorry that the Conservative party cannot bring itself to give that support, because it is pretty essential for the future of our country.

Yvette Cooper: My hon. Friend makes an interesting point about the way in which performance-related pay or different bonuses may be decided on and raises questions about whether there might be discrimination or unfairness as those decisions are taken. It is thus right that, in addition to looking at how to prevent an unfair bonus culture that overly rewards excessive risk across the financial sector, we should also look at whether any discrimination is taking place. My hon. Friend may be aware that my right hon. Friend the Minister for Women and Equality has instigated work in this area.

Paul Flynn: Because of the dreadful price paid by this country in blood and treasure after the previous surge of troops in Afghanistan in 2006, may we have an assurance that, before another surge is contemplated, we will have before us a full financial appraisal?

Alistair Darling: I believe that it is essential to have an independent regulator such as the FSA. Indeed, the hon. Gentleman might do well to remember that it replaced some seven or eight self-regulatory organisations that, for example, manifestly failed to prevent the mis-selling of pensions in the late 1980s. That is why we set it up. The FSA has a responsibility to regulate the financial services industry. It routinely raises concerns about firms from time to time. It would not routinely report those concerns to the Treasury unless at that time it felt that there was a major systemic risk. Clearly, it did not feel that such a risk was evident when it carried out its investigations, because it did not report any suspicions to the Treasury at any point. However, I do not think that one can argue from that that there should not be independent regulation of the finances services industry. That position is just patent nonsense.

Angela Eagle: My right hon. Friend the Minister for Local Government has recently announced to the House, following our announcement in the pre-Budget report, a unprecedented period of eight years to pay back these liabilities, which are properly and rightly assessed, as happens routinely with all business services. There is an eight-year pay-back period; it is interest free; and it should offer a great deal of help.

Harriet Harman: The hon. Gentleman raised a number of important points about our health strategy, child health, the dementia strategy and the importance of memory clinics; I will look at the forthcoming business of the House and see whether we have enough opportunities to debate those important issues, alongside the important issue of the economy, which I know the House wants to prioritise. Of course, the Conservatives have an Opposition day debate in the week in which we get back, so he could consider making the issue the subject of that debate.
	The hon. Gentleman mentioned the 39 written ministerial statements that are being issued today. Something like 24 of those are spring supplementary estimates. It is custom and practice for the spring supplementary estimates to be given by way of written statements to the House. I think that that is perfectly in order. If he wants to suggest that we do things differently, he is welcome to make suggestions.
	We have already discussed the position on Equitable Life, which was set out by the Chief Secretary to the Treasury in an oral statement, and she was answering questions just this morning. We all share the view that those who have been the victims of gross mismanagement by the management of Equitable Life and who are not protected because of a failure of regulation are owed an apology, and there needs to be financial compensation or financial recompense. That will be taken forward.
	The hon. Gentleman raised the question of the Youth Parliament. I agree with him: it would be right for the Youth Parliament of this country to be able to sit in the Chamber when the House is not sitting—obviously, not when the House is sitting, but in recess. We need to encourage young people to see our democracy at work and to imagine themselves playing a part in it. We tabled a motion that was before the House last night, and it was objected to. I ask the hon. Gentleman to work with me to persuade his right hon. and hon. Friends who objected. Their names are on the Order Paper:—
	"Mr Christopher Chope
	Mr Greg Knight
	Sir Nicholas Winterton
	Philip Davies
	Sir Paul Beresford
	Mr Humfrey Malins".
	I agree with what the hon. Gentleman said, so he should address himself to his Back Benchers.
	The hon. Gentleman mentioned unemployment. We are extremely concerned about anybody who faces the prospect of losing their job, which is why we have taken all the action we possibly can to stabilise the economy in the face of a global financial crisis and to give as much help to businesses as we can. We have been prepared to see Government borrowing rise in order that we can defer tax requests to small businesses, and about 30,000 businesses have been helped by not having to pay their tax. The only way to allow them to do that is to allow Government borrowing to rise, so we have, as the Chancellor has just told the House, put potentially £12 billion into the economy through the VAT cut in order to keep the lifeblood of business flowing and protect people from losing their job.
	When the dreadful blow happens and somebody loses their job, we have taken action to make sure that they do not have to lose their home. Again, that has meant extra public spending, and we have had to allow borrowing to rise to compensate for it—for example, by bringing forward the help on interest payments on their mortgage from 39 weeks to 13 weeks for those who lose their job. That all costs money, and we have allowed the public debt to rise to provide that help. We are concerned about unemployment, but instead of just saying we are concerned and wringing our hands, we are taking action on it and putting money behind it, compared to what the Tories would do—wring their hands and not put any money up behind it.
	The hon. Gentleman talks about foreign workers, and I must take issue with him about that. We must be very careful not to overlook the role that migrants have played in the life of this country over the centuries. I will share with the hon. Gentleman some figures that I was reading this morning. The House should listen. The figures relate to the Queen Elizabeth II hospital in Welwyn Garden City. In the Welwyn Hatfield area 6 per cent. of the population are from black and Asian minority ethnic communities, but of the people who work in the hospital, 50 per cent. are black and Asian. Migrants to this country are more likely to be standing at our bedside saving our life than lying in a hospital bed. We must recognise the role in the economy and our public services played by people who were not born in this country. Indeed, many hon. Members were not born in this country, so I do not agree with the hon. Gentleman's approach.
	In conclusion, the hon. Gentleman made a load of snide remarks about the Prime Minister, and he made snide remarks about me, too. I am disappointed. I know my hon. Friends warned me, but I said the hon. Gentleman was different. They said, "He's just a Tory. He's the same as all the others," but I said, "No, I think he's different." I even bought him a Valentine's card, and I thought me might buy me, or rather get me, a little trinket from the Sultan of Oman. It is clear now that he is the same as all the others. He does not see things in the way that I do, and he does not believe in the things that I do—he does not believe in helping people, if they get into difficulties; I do. We started off well at the beginning of the year, but it's over!

Lindsay Hoyle: Will my right hon. and learned Friend consider having a topical debate on the success of free pensioner travel and whether we could extend it to cover trains? Furthermore, could we extend it to the young people of this country, so that schoolchildren and students travelled free, as pensioners do? There have been great benefits and the scheme has been a great success. The Government should be proud of it, and if it can be extended to other people, that would be even better.

Hon. Members: What about the general issue?

Mr. Speaker: Well, we will leave the general issue and that means that we are on safer ground.

Harriet Harman: It looks as though it is expanding beyond a topical debate into a full-day debate. As well as public sector pensions, which is an important issue, I was also thinking, as I listened to the hon. Gentleman's comments, that there is an opportunity to discuss age discrimination and related provisions in the forthcoming Equality Bill. We have added to the list, and I thank him for his suggestion.

Stewart Jackson: I am sure that the Leader of the House will agree with this point because she considers herself a champion of fairness and equality. May we have a debate in Government time on systematic and institutional discrimination against Christians? We saw last week the case of Mrs. Petrie who was suspended by North Somerset primary care trust and reinstated only after a media furore. This week, anti-Christian zealots in Devon are on the verge of suspending a lady who works in a school for defending her Christian beliefs and those of her daughter. Does fairness and equality apply only to people who are non-Christians in this country?

Harriet Harman: The issues that the hon. Gentleman mentioned could certainly be included in the debate that I said I am considering and I congratulate the  Lancashire Telegraph for raising those issues. That is why we have been so determined to press down food and fuel prices and to do everything that we can to help pensioners in difficult times.

Harriet Harman: I am delighted that the hon. Gentleman urges me to have a debate about political correctness. The answer to that might be "yes", and I am sure that he will want to congratulate the leader of his party on insisting that a Tory candidate take down a nude pin-up that he was displaying in his office. I am sure that he agrees with his party leader about that.

Eric Martlew: I ask my right hon. Friend to ignore the hon. Member for Chipping Barnet (Mrs. Villiers)l; I would remind him that the Tories cancelled the high-speed train for the west coast main line. I am pleased that John Laing's, which started as a small building company in my constituency, is playing a major part in the project. However, the reality is that we get new trains from various suppliers, yet in this country we still do not have an adequate test track. If we are not careful and if we do not get that test track, we will build the trains but send them to Germany to be tested. Will my right hon. Friend look at that?

David Taylor: Further to the point that my hon. Friend the Member for Carlisle (Mr. Martlew) made, the Secretary of State's father probably tested the 125s on the test track in north Leicestershire. Can my right hon. Friend confirm that the east midlands location referred to in the statement is even more specific, in that it would be in North-West Leicestershire, close to the town of Ashby de la Zouch, where there is a well developed supply chain and a long tradition of high engineering skills, which spin off into Toyota, Rolls Royce, Bombardier, Brush in Loughborough and elsewhere? What influence will the Government have on the eventual decision and is it a commercial one only? Finally, would my right hon. Friend see me about the planning implications of the location of any manufacturing plant in or near Ashby, which, as things stand, is currently crowded in by all sorts of planning pressures?

David Anderson: I welcome this news, which stands in stark contrast to the do-nothing attitude of the Conservative party. May I point out to the Secretary of State, however, that high speed does not necessarily mean high quality? In the past year or two, the east coast line has seen job cuts resulting in reduced services for the people on board, so can we please be clear that, while high speed is good, other things also need to be put in place? Will he also have a word with National Express, which needs to get its act together?

Charles Walker: I share a line with my hon. Friend the Member for Hertford and Stortford (Mr. Prisk), and in the morning it is hell in Broxbourne, beyond hell in Cheshunt and simply miserable for commuters as they go into Edmonton and Enfield into London. I am delighted that there is to be new rolling stock. May I ask the Secretary of State whether I could meet his officials or one of his junior Ministers for a gentle discussion about timings?

John Pugh: In the Transport Committee strategy report, it states:
	"We note how little new rolling stock is going to be available to areas outside London and the south-east".
	Frankly, what is being done about the old, unsafe 142s that shunt between Southport and Manchester on the Northern rail franchise, which are acknowledged to be the very oldest on the entire network?

Andrew Selous: I am very glad that my hon. Friend has raised that point. He is right to do so: people on very low incomes, such as pensioners and others, are extremely vulnerable to unscrupulous people charging very high rates of interest. Indeed, that was why the former shadow Secretary of State was right to raise concerns that people on benefits were going to be charged rates of up to 27 per cent. in the White Paper brought forward by the Department. However, the broader important point has to do with the lack of availability of affordable credit for very large numbers of constituents around the country. We need to be a lot more innovative about involving credit unions and perhaps many other players who are not in the field to meet what is a very real need. This is a serious point, and my hon. Friend is right to raise it.
	The Rossi index is the other main index used to uprate the different allowances and benefits—jobseeker's allowance, council tax benefit, housing benefit and income support—covered by the order. It is compiled in the same way as the retail prices index, except that it excludes rent, mortgages, interest payments and housing depreciation costs. It is higher than the RPI this year because housing costs were falling over the year to September to 2008. It is also important to remember that the Rossi index is different from the consumer price index which, confusingly, is the main inflation index used by the Government and the Bank of England.
	Later in my remarks, I shall refer to the Government Actuary's report accompanying the two orders before us. It looks at the orders' effect on the national insurance fund that is used to pay out benefits and pensions for which national insurance contributions are a necessary qualifying condition. They include state retirement pension, contributory jobseeker's allowance and contributory employment and support allowance.
	There are concerns about the assumptions being used by the Government Actuary and the Chancellor in the pre-Budget report, and the use to which the fund may be put. That is an important subject, and I shall deal with it later in my remarks.
	The benefits and pensions that are uprated by these orders are vital elements in combating child, adult and pensioner poverty, but by no means are they the whole solution. We want to help the workless get back into work, where appropriate, and we want to find the best possible ways of enabling people to avoid poverty, including poverty later in life. We recognise the strong connection between worklessness and children growing up in poverty, and that it leads to fewer life chances for those children.
	As for the effect of the order on the child-related benefits, we support the Government's aim to end child poverty by 2020, and we will support them if they produce sensible legislation to make that target binding. On its own, however, uprating the benefits in this order will not be enough, as the Department's figures show that the number of children in poverty has risen by 100,000 for the second year in a row. On current progress, the Government will miss by 500,000 children their target of halving child poverty by 2010. We believe that a broader approach is needed, one that does not just involved the benefits uprated by the order. They are vital, of course, but there needs to be serious engagement with schools, family life, local authorities and registered social landlords.
	I turn now to the working age benefits, which of course are of immense significance after yesterday's greatly heavily increased unemployment figures. In December, 1.97 million people were declared as unemployed, a total that was 146,000 up from the three months to September 2008. Not all of them are entitled to claim the benefits uprated in the order, and not all of those entitled to claim choose to do so.
	The order increases jobseeker's allowance for those under 25 to £50.95 a week. That is relevant, as unemployment among 18 to 24-year-olds sadly increased by 38,000 in the three months to December to 616,000.

Andrew Selous: I am very grateful that the hon. Gentleman has raised that issue, and I studied carefully the comments that he made on this matter on the Gallery News email service yesterday. He has a point, and I shall refer to it in my remarks very shortly. I was quite struck by the percentages to which he drew attention yesterday, so I think that he is certainly on to something. I do not know exactly how we will solve the problem, but I commend him for raising it.
	Jobseeker's allowance for people over 25 has been raised to £64.30 a week, an amount that the Minister for Employment and Welfare Reform admitted yesterday that he would be unable to live on. That is relevant because the claimant count for January increased to 1.23 million, which means that 73,800 more people were claiming the uprated benefit than was the case the month before.
	As the hon. Member for Chorley (Mr. Hoyle) has noted, there has been no increase in statutory redundancy payouts, and the important point that he raised yesterday is that they represent some 56 per cent. of average weekly earnings, as opposed to 203 per cent. when they were first brought in in 1965. That is something that the House should be concerned about. If there has been a specific policy change, I think that we should know about it and debate it. We should see whether we think that it is fair and right, and what we can do about it within the limits of public expenditure. However, if the amount paid has been allowed to wither on the vine without anyone noticing or caring, that is concerning to me.
	This is important, because redundancies are, very sadly, up. In the three months to December, 259,000 people reported that they had become redundant. Sadly, the OECD believes that many more people will claim the benefits uprated in the order, and it has predicted that unemployment will rise faster in the UK than in any other G7 country.
	My party has a range of positive proposals to tackle unemployment, but I do not think, Mr. Deputy Speaker, that you would consider me in order if I decided to outline them now. Instead, I want to turn to the very important matter of pensioner benefits that has been raised already, and quite properly, by a number of hon. Members.
	The Chancellor's pre-Budget statement in November was the basis for a significant part of these orders, but its wording was not as clear as it could have been. It has been criticised by the  Daily Mirror and more recently by the National Pensioners Convention. The Chancellor said:
	"So I will ensure that every pensioner gets a one-off payment of £60 on top of the £10 Christmas bonus, from January. For couples, that figure will be £120, also paid from January."—[ Official Report, 24 November 2008; Vol. 483, c. 503.]
	Dot Gibson, the formidable vice-president of the National Pensioners Convention, is still waiting for her £60 payment. She has said that
	"the Chancellor implied that this payment was in effect a bringing forward of the increase in the state pension due in April, but if it doesn't arrive until the end of March, the whole episode has been a charade. Millions of older people have been misled and must now be left feeling cheated.
	One pensioner rang up to say her brother who lives in France got his £60 on January 1st, but she lives in London and is still waiting...If we had a decent state pension in the first place we wouldn't need to rely on these extra payments."
	I want to look at the issue of means testing and take-up, which my hon. Friend the Member for Ribble Valley (Mr. Evans) quite properly raised at the start of the debate. There are 3.7 million beneficiaries aged 60 and over in receipt of income-related benefits, and that is 30 per cent. of the population of that group. However, 1.8 million are not claiming the pension credit uprated in the order, which has now been increased to £130 a week. That is of great concern. It may interest the House to know that, in November 2004, the then Secretary of State for Work and Pensions said:
	"The Government still has a take-up problem on pension credit."
	Of the poorest pensioners, where household income is less than 40 per cent. of median earnings, 60 per cent. are not claiming the benefits that they are entitled to—up from 36 per cent. in 1997-98. About 40 per cent. of those entitled to council tax benefit, uprated also in the order, do not claim it.
	We rightly hear a great deal about fuel poverty, particularly regarding pensioners, but pensioners often tell me that they consider themselves to be in council tax poverty, too. I find it quite extraordinary that up to £4.5 billion of means-tested benefits that should rightly go to older people is unclaimed each year. Perhaps that is what the Prime Minister feared when he said:
	"I want the next Labour Government to achieve what in 50 years of the welfare state has never been achieved—the end of the means test for our elderly people".
	We welcome the increase in the state pension, which, as the Minister told us earlier, will be worth £95.25 a week and £152.30 for a couple, and perhaps the Minister will join me in gently pointing out again to the leader of the Liberal Democrats that it is not about £30 a week. Will the Minister also tell us exactly when the Government intend to restore the link with earnings for the state pension? She alluded to the well-worn formula, but many people would like greater precision on that subject. If she said something on that when she replies to the debate, we would all be grateful.
	It is worrying that the take-up of pension credit continues to decline, as an answer that the Department gave on 3 November last year shows. In November 2003, the take-up for female pensioners was 64.9 per cent., and according to the latest figures that I have, which are for February 2008, it has declined—albeit only by a small amount—steadily to 62.1 per cent. So we have not only a problem, as my hon. Friend the Member for Ribble Valley has quite properly identified, but one that is getting worse.
	It is worth putting on the record the number of pensioners not claiming individual benefits, which are uprated by the order. Up to 1.82 million older people are not claiming pension credit—41 per cent. of those entitled. Up to 350,000 older people are not claiming housing benefit—18 per cent. of those entitled. Up to 2.14 million older people are not claiming council tax benefit—a staggering 45 per cent. of those entitled.
	Pensioner poverty has risen by 300,000, both before and after housing costs are taken into account, and is higher than in 1997. In 2006-07, 2.5 million pensioners were living below poverty threshold of 60 per cent. of median income, representing 23 per cent. of pensioners. After allowing for housing costs, 19 per cent. of pensioners were below 60 per cent. of median income, representing 2.1 million individuals. Those facts were pointed out by Help the Aged as recently as Tuesday of this week. Again, perhaps when the Minister replies, she will tell the House what estimate of pension credit take-up the Chancellor of the Exchequer will use in his Budget report this year.
	The Government received quite a lot of criticism last autumn for their decision to reduce the period of backdating from 12 to three months for pension credit claims. That suggests that they are more interested in saving money than in increasing take-up. So will the Minister confirm that at least 110,000 pensioners will be adversely affected by that change and that they will tend to be older pensioners, who will not be able to claim some of the benefits uprated by the order?
	Falling interest rates may be popular with some people—indeed, with many people, particularly home owners—but they are really bad news for one section of the population. So does the Minister recognise that many pensioners are facing real hardship because their hard-won savings are now attracting very low interest, thus forcing them to rely on many of the benefits uprated by the order? We are talking about people who have done the right thing and what successive Governments told them to do: they saved during their working lives, so that their savings could supplement their incomes in retirement. To add insult to injury, those with modest savings are assumed to earn 10 per cent. on their savings in respect of their eligibility for pension credit, which is uprated by the order.
	Will the Minister update the House on the conversations that the Minister for Employment and Welfare Reform told the House that he would have with her and the Treasury on this matter when he made his statement on 11 December, as reported in column 697 of  Hansard. We would like to know how they got on when they went to the Treasury on that matter. Will the Minister confirm that she is wholly confident that the new personal accounts system will begin on time and that people who are being auto-enrolled into personal accounts will not be worse off by not being eligible for pension credit, which is, again, uprated by the order.
	The Government have presided over the decline in a large number of occupational pension schemes, and we would like to hear the Minister say something about that as well, because of its direct effect on people being forced to claim the benefits in the order.
	Fuel poverty has been mentioned by one or two hon. Members, and the statistics that the Department for Business, Enterprise and Regulatory Reform released recently show that electricity prices have gone up by 17 per cent. in real terms and gas prices by 27.1 per cent. over the past year. Again, that has a bearing on the 5 per cent. figure used to uprate the basic state pension.

Andrew Selous: Certainly, there is some truth in what the hon. Gentleman says, and I personally think that we need a range of policies to deal with this very important issue and the scandal of the poorest people paying the most through prepayment meters—a matter that I raised in the House a number of years ago. We could do all sorts of things—for example, with the Post Office card account, the use of which the hon. Gentleman will be particularly keen to encourage. People could be provided with decent information, telling them whether they are getting the cheapest tariff. They should not have to ring up and ask; it should be made absolutely obvious to them—something that the Conservative party is proposing. There is something in what the hon. Gentleman says, but we can do a number of other important things to tackle the issue.
	I want to deal with fraud and error—a subject that the Minister for Employment and Welfare Reform mentioned when he made the December statement in relation to the order. It is an important issue, because if we were able to deal more effectively with the £2.6 billion overpaid, we could uprate many of these measures more generously. The figures are pretty staggering: £2.6 billion overpaid, and £1.1 billion of benefit expenditure underpaid. That has been going on for a very long time, and it includes money paid wrongly to prisoners, to people who have moved abroad and who were not entitled to it, to people already earning an income through employment and to people already claiming other benefits.
	The Department is now running a sort of television show, showing some of its inspectors doing very good work. It makes quite entertaining television, but I tell the Minister in all seriousness that £2.6 billion is a very large amount of money at a time of great pressure on public expenditure. Again, I ask her to go back to the Department and discuss the matter with the Secretary of State and her fellow Ministers and to urge that that matter be pushed rather higher up the Department's agenda. We could be more generous with the uprating of a number of these benefits, which, as a number of Members have pointed out already, are not that generous for many of our fellow citizens in great need.
	I want to consider the issue of the complexity of the benefits system. As I have said, 14 pages of benefits are uprated by the order that we are considering. That is 14 sheets of closely typed A4. The National Audit Office report, "Progress in tackling pensioner poverty: Encouraging take-up of entitlements", underlines the fact that complexity is part of the problem when it comes to delivering support to those who need it. It states:
	"Many pensioners and those that advise them"—
	we must not forget the lobby groups and support groups that help pensioners—
	"consider the systems and administrative procedures for claiming benefits to be too complex. In all there are 23 potential entitlements for pensioners, with 36 linkages between 16 of them."
	Our pensioner population will need degrees in higher mathematics to work their way around some of the system.
	Similarly, the 17th report of the Social Security Advisory Committee, published in 2004, says:
	"complexity characterises the entire benefits system...the size, complexity and dispersion of the benefits system, and the blurring of the boundaries over what should constitute its proper role has led to a pervading sense of a loss of cohesion".
	Bodies do not come much more independent than the Social Security Advisory Committee. Help the Aged makes a point in similar terms. It says, on benefits for pensioners, that the
	"system is so muddled and poorly advertised that even Pension Credit, a widely advertised benefit aimed at some of the poorest older people, is only claimed by just over half of those entitled to it."
	I come to the final subject that I want to discuss. It is incredibly important, and I should be grateful if the Minister would respond to this part of my speech as fully as she can when she winds up the debate. If there are points to which she cannot respond, will she write me a fairly full letter on the subject, and put a copy in the Library? I refer to the thorny issue of what is happening in the national insurance fund. I have great concerns about the assumptions that the poor old Government Actuary, Mr. Trevor Llanwarne, has been forced to use, namely the ones given to him by the Chancellor in the pre-Budget report. I have before me a report from the Government Actuary's Department; it is directly relevant to the debate. Indeed, it was produced for the House, and is about the two orders before us. The Government Actuary is forced to use the assumption, made by the Chancellor in the pre-Budget report, that there will be an increase in earnings growth of 3.2 per cent. in 2009-10. The average of the forecasts in the Treasury's January comparison of independent forecasts for the UK economy is an increase in earnings growth of only 2.7 per cent for 2009-10.
	The assumption in the pre-Budget report on claimant count unemployment for 2009-10 was 1.31 million. Yesterday, the figure rose to 1.23 million. The Treasury's January forecast for 2009-10, which uses independent forecasts, is average claimant count unemployment of 1.83 million, so the first thing that I want to say about the national insurance fund is that I am concerned about the assumptions in the pre-Budget report that the Government Actuary has been forced to use. Even small changes in those assumptions are likely to have a very large impact on the fund.
	I want to ask the Minister a question that I should think almost every Member of the House is asked regularly by pensioners in their constituency, not least if those pensioners are allied to the National Pensioners Convention. It is on the thorny subject of the increasing surpluses in the national insurance fund, and the fund's increasing balance. I do not know about the situation in the Minister's constituency, but in mine, the Dunstable pensioners' association and other bodies haul me in once a year and ask, "What are you MPs doing? You are sitting on more and more cash in the fund. We're not very well off. By law, the money can be given only to pensioners and others. Why can't we have some of it?" That is more or less what they are saying.
	I see from the Government Actuary's report that the Government Actuary is required to make sure that there is a yearly excess of at least one sixth over and above what is paid in benefits. This year, that will be a sum of £12.5 billion, yet when we look at the report, we find that the balance is actually £52 billion. The surplus, and therefore the overall balance, has got larger year on year since about 1997, and it is forecast to grow in a substantial way. If Members look at page 30 of the report, they will see that the balance will rise from £52 billion in 2008-09 to £102 billion in 2013-14. That is a substantial rise. That may well be necessary because of demographic trends in the population—there will be a lot more pensioners, and a lot fewer people paying into the national insurance fund—but I have not found that clearly stated by any Minister in recent times.
	It causes me slight concern that when the hon. Member for Newport, West (Paul Flynn) tabled a question asking the Minister's predecessor, the hon. and learned Member for North Warwickshire (Mr. O'Brien), about the issue, part of the answer received was:
	"when there is a surplus it is invested in public services."—[ Official Report, 22 February 2008; Vol. 472, c. 1116W.]
	The Minister knows as well as I do that, by law, the national insurance fund can be used only for pensions, jobseeker's allowance and so on—a very narrowly defined range of public services. People might see the answer and think that money was being taken out of the fund and spent elsewhere in government. The Minister's predecessor went on to say, again in a written answer:
	"The equivalent of the excess of receipts overpayments would need to be raised through tax increases to maintain the Government's fiscal strategy."—[ Official Report, 21 April 2008; Vol. 474, c. 1858W.]
	That is in relation to the issue of ever-increasing yearly surpluses in the fund.
	There may be perfectly good reasons why the balance in the fund is increasing in such a significant way—and such a sustained way, according to the forecasts in the back of the report—but we need clearer answers on the issue, if only so that we can properly engage with people from the National Pensioners Convention and others who are, quite properly, considering the issue and wondering whether the Government could be more generous. I hope that I am not blind-siding the Minister on that issue; I know that it is technical and complicated, but it is incredibly important. I am not playing party politics on this serious issue. If she is not able to give the House a full answer today, will she write me a full letter, and place a copy of it in the Library, so that every Member can see it?
	To conclude, I hope that when we debate next year's uprating order, fewer people will be in dependency, and more people who want support can get it. I also hope that the millions of people who say that they would work if they had the proper support will have had the chance that they want of a better life for themselves and their families, and the chance to be less reliant on benefits. We hope, too, that more of our fellow citizens will be able to make arrangements for their pensionable age, so that some of the all-too-low pensioner incomes will be higher. We will work with the Government on any proposals that they make, but I serve notice on them that the Opposition will make their own proposals to deliver better welfare, and a fairer system that lifts more people out of dependency, which is not where so many of our citizens want to be.

John Barrett: It is interesting that in a week when much of the news has been about people at the other end of the pay scale—those earning large sums of money—we are considering people who are surviving on benefits, and who are very much at the opposite end of the scale. Sadly, important though the measures before us are, they will not get the same news coverage as people who have been getting large bonuses and salaries. That is not to say that the measures are not important; they affect millions of people.
	The hon. Member for South-West Bedfordshire (Andrew Selous) covered many of the issues in great detail in his excellent speech. We welcome the uprating today. We are talking about a significant amount of money that will go to those who are most in need. I am delighted to see pensioners getting a significant rise in their pension. Of the £6.2 billion, £4 billion is going to pensioners. I could say it is too little too late, but we should welcome what has been announced today. It is a good thing.
	We have heard the details of the figures involved. I share with the hon. Member for South-West Bedfordshire a concern about the complexity that runs throughout benefits uprating and the entire benefits system. The 14 pages of details are too much. It is not only difficult for those receiving the benefits to understand; it is also very difficult for those trying to give them advice and work out exactly what benefits people are entitled to.
	As I said in my intervention, I thank the Minister for prior sight of her statement on invalidity allowance. I am pleased that no amounts will be claimed back. It is clear, once again, that because of the complexity of the system, many errors are made. So many people contact hon. Members regularly about errors made by the Department for Work and Pensions, particularly on tax credits. The Minister dealt with one relatively small error, but there are far larger errors out there that need to be tackled. It is also worth remembering today that there are many tapers, allowances and premiums that are not being uprated and have not been uprated for many years.
	We are entering different times. Last year's benefit uprating occurred before the increase in unemployment that we are, sadly, seeing now. With unemployment nudging the 2 million mark and with four unemployed for every vacancy, tackling poverty among the population of working age will assume increasing importance. Even in my constituency, which is not normally noted for much unemployment, Royal Bank of Scotland headquarters announced 2,300 redundancies earlier this week. Many people, for the first time in their lives, will be looking at the results of today's debate. People who have never known unemployment in the past will rely on the upgrading and the benefits that we are discussing.
	With unemployment rising across most sectors, there will be an increasing number of skilled workers on benefits and seeking employment. Although the extra money for jobseeker's allowance is welcome, is the Minister concerned that back-to-work benefits and policies under the Welfare Reform Bill are ill suited to high unemployment? We are considering a number of changes but, in the words of one famous individual, the times are a-changin'.
	I welcome the commitment that incapacity claimants with an age addition will not receive less than £95.15 a week. But does the right hon. Lady understand the frustration of disability groups, in particular, that the rate of support component will be no more than incapacity benefit, despite past promises to the contrary? Does she share my concerns that welfare to work and jobseeker's allowance arrangements have been designed to work in a period of low unemployment, as I said, unlike the circumstances that we will see in the year ahead? We are considering the uprating and various cost of living rises—the Rossi increase was mentioned—but we may be moving into a time of negative inflation.
	In the year ahead, as we enter uncharted waters, the Minister and her Department should consider how we ensure that benefits reach a more realistic level. I am amazed at how many people survive on the basic benefits. In the Treasury Committee, one banker asked what the level of jobseeker's allowance was—what people have to survive on. The figure is about £60 a week. The individual who answered the question was earning about £60,000 a month. Some people out there are surviving on very low levels of benefit.
	I welcome the decision to increase the state pension to £95.25 a week. Will the Minister take on board the point that when benefits are calculated, the income that savers are assumed to receive from their savings is 10 per cent., but that is not happening in practice? People who have been prudent throughout their lives, people who have saved and put money by, do not want to dip into their capital because that will reduce their income and affect the amount of benefits they will have to ask the state for. Many pensioners who have been prudent all their lives do not want to apply for means-tested benefits.
	There is too much means-testing in the system which, along with the complexity, puts many people off applying for benefits. It has been estimated that 1.8 million eligible pensioners do not claim pension credit. When I have raised the issue of means-testing in the past, it has been argued by the Government that that will focus most help on the people who most need it, so that the most deserving are in receipt of the amounts to which they are entitled. Sad to say, those most in need are not those who are entitled to and receive means-tested benefits, but those who are entitled to but do not receive the means-tested benefits, and they are right at the bottom of the heap. Those 1.8 million pensioners who are entitled to money but are not receiving it were often told by the Government that increased amounts such as the Christmas bonus would help make up the difference, but the sum paid out in that form is a small fraction of the £2.8 billion in unclaimed pension credits.
	Fraud and error have been mentioned by previous speakers. It is vital that we ensure that fraud and error are kept to a minimum because both, in effect, take money away from those who are entitled to benefits. The elderly, the disabled, the unemployed, and people trying to get into work and off benefits should get the maximum support to which they are entitled, and if money is being lost through fraud or error, it is not going where it needs to go.
	The Minister mentioned the winter fuel payment. Although I agree that that is usually a Budget issue, will she consider a higher rate for those who claim the higher rate mobility component of disability living allowance? Although benefits help many of those who are disabled, it is extremely expensive to keep the home of someone who is disabled warm, for two reasons—partly because, in certain cases, disabled people do not move around as much as the rest of us, and partly because there is a far higher unemployment level among the disabled so they are more likely to be at home and to need their home heated. The third factor is that the average income of a household with a disabled person in it is lower, so although the costs of running a disabled household are often higher, the income is often lower. The people caught in that pincer movement need extra benefits, and we must make sure that those who are entitled to the benefit receive it.
	It was mentioned earlier that falling interest rates were helping those with mortgages, but many of those who are unemployed and receiving mortgage interest relief are on fixed rate mortgages. I was pleased to see that the Chancellor and the Department have agreed not to introduce the formula which reduces the amount of mortgage relief until May, but if the base rate stays at 1 per cent., the current system whereby people receive their mortgage interest relief is 1.58 per cent. above base rate. That will give people mortgage interest relief at about 2.5 per cent., but 50 per cent. of those paying mortgages have fixed rate mortgages at 5 or 6 per cent.
	I appreciate the action that the Government have taken by not reducing until May the amount that such people are paid, but between now and May a new system will have to be introduced or we will find that the new group of unemployed people who are on fixed rate mortgages will receive a benefit that does not cover their mortgage interest. The end result of that will be that not only will they have lost their job but they will be in danger of losing their house. We hope that many people who are unfortunate enough to lose their job will get back into the job market fairly quickly, but in these times of rising unemployment, that will be more difficult. The last thing that they need is to lose their house at the same time.
	As I have said, I do not want to be niggardly, and I welcome the measures that have been introduced. When the Minister winds up the debate, I would like her to address the issues that we must deal with in the future—higher unemployment, means-testing, which is a major problem with the uprating, low inflation, complexity, which other hon. Members have mentioned, and the high levels of error and of fraud.
	In conclusion, I welcome what has been given, but the Department has so far to go.

Oliver Heald: I am glad to have the opportunity to contribute to this important debate.
	The hon. Member for Edinburgh, West (John Barrett) echoed a point that my hon. Friend the Member for South-West Bedfordshire (Andrew Selous) made from the Front Bench about the complexity of the benefits system and of the uprating that we are considering today, which is where I want to start. It is widely recognised that the system of benefits is complex. When the question, "What is a reasonable amount of money for an income replacement benefit?" is asked, there are many different answers. It has been thought for some time—the Work and Pensions Committee has reported on this—that we, as a country, should have a serious look at our benefits system and what a proper level of income replacement benefit should be.
	We should not have a situation in which carer's allowance goes up by one amount and jobseeker's allowance goes up by another, and we should not have a situation in which carer's allowance, which is supposed to be an income replacement benefit for carers, is a totally different amount from JSA, which is also supposed to be an income replacement benefit. Our system is over-complex, and the case for simplification is strong. I hope that the Minister and her colleagues will, in the quietness of their private discussions, examine whether we cannot move to a system that better suits the needs of the new century.
	There are, of course, temptations for Ministers in an over-complex system, and the devil is often in the detail. On the face of it, it is surprising that Ministers come here every year to announce "handsome" increases in benefits, yet at the same time the Institute for Fiscal Studies, which produced a major report on the matter last autumn, tells us that in 10 years' time pensioner poverty will be exactly the same as it is now. It is very surprising that with all those handsome increases, the Joseph Rowntree Foundation told the Work and Pensions Committee that over a 20-year period the effect of fiscal drag and benefit erosion, which lies in the detail of what has been announced, means that the Chancellor will recoup 3.6 per cent. of gross domestic product from the overall bill. That raises questions about the core benefits system, such as whether those benefits are sufficient for the people whom they are supposed to help and what is really going on behind the scenes.
	I suspect that a good deal of sleight of hand goes on, and I will give two examples after I have commented on the point made by my hon. Friend the Member for South-West Bedfordshire about the national insurance fund. Tolley's tax notes record that
	"David Lloyd George stood before Parliament and introduced...the novel concept of National Insurance...as a 'temporary expedient'...It is a curious fact that despite the size and permanence of this levy, very many people know little about it".
	In the fourth edition of their text on the matter, Ogus and Barendt record that
	"People are prepared to subscribe more by way of contributions, which they see as offering returns in the form of personal and family security, than they would be willing to pay by taxation".
	The Government have been diverting money from the national insurance fund into the health budget. The Minister may want to comment on that, but it did not used to happen to the extent to which it does now. That is why the parliamentary answer to which my hon. Friend the Member for South-West Bedfordshire referred pointed out that we must bump up income tax, or a tax, if we do not want a large balance in the national insurance fund—it is jiggery-pokery or sleight of hand.
	Turning to carer's allowance, the Work and Pensions Committee produced a major report on carers in the autumn. One of our points concerned the size of carer's allowance, which is much smaller than other income replacement benefits. We made the case that the Government should conduct a major review of carer's allowance and that they should treat it as a proper income replacement benefit.
	The Committee also made a more technical point, which the hon. Member for Blackpool, North and Fleetwood (Mrs. Humble) mentioned earlier. Each year, the decision about uprating the amount that people can earn if they are on carer's allowance is made in April, whereas the decision on the national minimum wage is made in October. The effect is that if the national minimum wage goes up by a certain amount, a number of carers are forced off benefit. In the spring, when the uprating takes place, they go back on to benefits, because the benefits have caught up. The Committee felt that that was unhelpful and that the changes should be synchronised, because that would help many carers organise their lives.
	The sad thing is that that would inevitably cost the Government a little bit of money, because those people would no longer be forced off benefit, which is an example of the sleight of hand that occurs. Maintaining that lack of synchronicity saves the taxpayer a little bit of money, but it messes up the lives of carers and is not helpful. Perhaps the Minister will care to admit that that is why the situation has not been changed.
	The Committee highlighted that problem and pointed out that it is making life very difficult for carers. It is therefore surprising that the limit for earnings by those receiving carer's allowance has been frozen, so carers will not catch up this year. Not only is there no synchronicity, which we wanted to help carers, but carers have been done down a little bit by the limit not being increased in line with inflation, which is slightly higher than normal this year. That is another example of sleight of hand.
	My other example concerns the savings credit element of the pension credit. This year—this is being done at a very odd time—the band of income covered by savings credit is being raised. The effect is to narrow the band of income that is eligible for savings credit, which means that pensioners who have got just a little bit more than the basic state pension will get less help than previously. The timing is odd, because the band was supposed to be raised in the context of the Government's introduction of the new system, under which the basic state pension will be uprated by earnings rather than prices. The argument was that if the basic state pension plus the new arrangements for the state second pension were in place, that would already be helping those who had a little more than the basic state pension, so it would be right at that point to start cutting back on the savings credit. However, to raise the band now, when nobody has even set a date for the introduction of the uprating by earnings, is an example of the Government taking advantage. They are trousering a little money now, when really that should be done later.
	It is the same sort of thing as happened last year with the National Insurance Contributions Bill. The Government introduced the upper accrual point for national insurance contributions—again, that was supposed to happen when the basic state pension was uprated by earnings. However, the Government introduced that early as well. They have another year or two, perhaps more, during which people with incomes in the band between the upper accrual point and upper earnings limit are paying national insurance contributions and getting nothing for it. That approach—eroding benefits through the details, with a little sleight of hand—is one of the things that leads to strange results. Generous announcements are made, yet the overall effect, when we consider the detail, is not as good as it seems. So, yes, I support the uprating measures that we are discussing; obviously, benefits should be uprated. However, why do Ministers not have a look at what such little sleights of hand say to the general public and savers?
	There is a consensus in the House that we should tell people that they should save for a rainy day and for their pensions so that they do not end up in the situation of so many in the past who said, "There was no point in saving, because I'd have got just as much on benefits." We are trying to change that culture; we are saying that there should be a much more solid basic state pension and better inducements to save, and that we should gradually remove means-testing from the system. Yet the little lost battles that I have mentioned are working the other way. The system is not all moving in the same direction with a plan designed to encourage hard-working people who want to save.
	One has to ask why the Treasury is like that. There is a solid and long-standing history in the Department for Work and Pensions of wanting to encourage saving and, frankly, to minimise the means-tested benefits bill in the longer term. However, the Treasury looks at everything year by year in a short-term frame. It wants to make little salami slices so that it gets a little back-pocket money from its negotiations with the Department for Work and Pensions. However, overall, that is not in the national interest.
	The burden of my remarks is to ask the Minister whether it is possible for the Government to try to make longer-term decisions to sort out the benefits system. Does the devil always have to be in the system's detail? The result is that the Chancellor saves a little money in the longer term, but we do not get what we really want.

Charles Walker: I will, Madam Deputy Speaker.
	It is important that I make two observations about pensioners and their role in our communities, and explain why it is so important that we value that role. We in this place can never, ever do enough for pensioners. If I were Prime Minister, I would very much like to uprate the annual pension by £100 or £200 a week. However, I am not the Prime Minister and I appreciate that that would be impossible to do, whoever I was. I welcome the Government's announcement that they are uprating the state pension, but it is, frankly, not generous: £100 or £150 is the bare minimum. Therefore, we in this place constantly need to ask ourselves what more we can do for the retired. Are we doing enough? Of course, the answer will be that we are never, ever, doing enough, but we need to ask ourselves the question.
	It is important that when we discuss pensions, we consider the many issues facing pensioners today. We understand that although the value of their savings is not deteriorating, the interest on them is going down. A little more than eight months ago we have interest rates of over 5 per cent.; now, we have interest rates of 1 per cent. That is reducing pensioners' income. A few months ago, we had historically high petrol prices; again, that took a disproportionate amount of pensioners' income. As we have discussed, one index of inflation—the retail prices index percentage—puts pensioner inflation at 12.2 per cent. not the accepted percentage that we live by in this place. We have also seen year-on-year above-inflation increases in council tax, which have a disproportionate impact on pensioners and their incomes. A couple of hon. Members alluded to that.
	There is also the cost of utilities. The cost of electricity and gas in the wholesale markets has come down, but that has not yet fed through into the pricing of utilities on the doorsteps of pensioners. I am a relatively wealthy Member of Parliament, and I can afford to wait for utility prices to come down. I do not like waiting—nobody does—but I can afford to do so. For many pensioners, this is becoming very serious. We are having one of the coldest winters for 20 years. I congratulate the Government wholeheartedly on recognising that, but it is very important that they continue to place pressure on the utility companies to get their act together in this respect.
	Pensioners are absolutely at the heart of all our communities, and we owe them a huge debt of thanks and gratitude. Much of what they do goes unpaid and unrecognised, so we in this place have an obligation, year on year, to ensure that we are doing as much as possible for them.

Rosie Winterton: This has been a positive and engaging debate. I join the hon. Member for Broxbourne (Mr. Walker) in his praise of pensioners and the very positive points that he made. Labour Members believe that we have demonstrated that we share that view through several of the measures that we have taken and increasing provision for pensioners, whether in the pensions and benefits system itself, or on wider issues such as investment in the national health service and other public services that are used by our pensioners.
	Many points have been made during the debate. I will try to cover all of them, but if I do not do so, I will ensure that I write to right hon. and hon. Members. A number of contributions, particularly that of the hon. Member for North-East Hertfordshire (Mr. Heald), referred to the slightly complicated benefits system. The Department has a simplification unit that is constantly looking at how we can simplify benefits. I am sure that they would acknowledge that complexity has been placed on complexity, but we try to refine the system as much as we can. It is important, as the hon. Gentleman said, to look at a system that allows for longer-term decisions, and an element of certainty. However, as constituency MPs, we can all own up the fact that when we press for changes to the benefits system, such changes can sometimes inevitably lead to a greater degree of complexity.

Rosie Winterton: Other countries often look to our welfare state for inspiration, because it has lead the way in providing a crucial safety net for many vulnerable people. We look to other countries to see whether changes have been made that could help to simplify our system. On welfare-to-work benefits, for example, we have considered whether there are simpler systems in other countries.
	I want to deal with a number of points raised, staring with the so-called 10 per cent. rule, which was raised by the hon. Member for Edinburgh, West (John Barrett). I want to emphasise that there is no 10 per cent. rule. The income tariff is a simple method of calculating the contribution that people are expected to make to help to meet their living costs. Some 80 per cent. of pension credit recipients are unaffected by what is called the income tariff. The rules have been in place since 1988, but the Government have tried to make the system more generous than it was. Under the previous system, anyone with savings above £12,000 was not eligible for any support at all. The less generous rules also assumed £1 a week for every £250 of savings. Not only is the rate of tariff income half of the previous rate, we have abolished the upper capital limit, which gives more people access to more support.
	The hon. Member for North-East Hertfordshire, among others, raised the issue of carers allowance. As I said, as we work towards reforming the benefits system we will consider how we can best support carers in line with the principles outlined in the carers strategy.
	The hon. Member for Edinburgh, West talked about the fact that inflation was very and asked what would happen next year. Decisions on uprating for 2020-11 will be made later in the year, but the Government have already made a commitment to increasing the basic state pension by at least 2.5 per cent. Should inflation fall to a negative figure next year, I can assure the House that we would not be looking to reduce current benefit levels.
	A number of hon. Members touched on the question of trying to increase pensioner take-up. I said during my speech that there were a number of areas in which we wanted to see how we could improve take-up, and we will continue to do so.
	On benefit fraud and error, I reassure the House that we have an error strategy and that we are constantly considering ways to ensure that errors are not made. As I said earlier, I have tabled a statement to apologise for the fact that two types of error have been made, but we certainly try to minimise them. The estimated level of overpayment due to fraud and error across all benefits is at 2 per cent., the lowest ever, and we are bringing it down. There has been a great deal of consensus that personal accounts and auto-enrolment are the right way forward, and we certainly want to ensure that they start in 2012.
	I turn to the rate of pensioner inflation, as I believe it is called. It is true that a report by the Institute for Fiscal Studies on the inflation experiences of older households, published in October, suggested that in August 2008 pensioners were experiencing inflation of 7.4 per cent., or about 9 per cent. in the case of the oldest and poorest pensioners. However, it is important to point out that it is also stressed that in the long term average inflation is almost identical for pensioners and non-pensioners. It showed also that pension credit is worth about £430 a year than it would have been if it had been uprated since 2001 according to the inflation index used in the report. Similar figures show that the state pension is currently £340 a year more than if it had been uprated according to the inflation figures given in the report since 1987.

Rosie Winterton: I believe that it is during the time when they are a pensioner, but I can return to the hon. Gentleman with further details on the report if that would help.
	On the general point that hon. Members made about savings, I hope that they are aware that the Chancellor has said that he is considering policy options to help pensioners who are currently affected by the interest rates cuts, and that those options may be implement in the Budget this spring.
	I will write to the hon. Gentleman about the national insurance fund. I am sure that he realise that the combination of recent economic prosperity and demographics means that contributions currently exceed claims. Some of that money has been used to reduce Government borrowing, which ensures that everybody benefits, including pensioners. However, that does not necessarily mean that today's recipients have an unlimited claim on the fund. We need to consider the balance between what is currently happening and what will happen if things become difficult, perhaps because of the downturn or when the demographic balance shifts. We need to ensure that we get that balance right. As hon. Members said, there is a campaign by people who say, "There is £30 billion, it is our money and we should have it straight away." However, there are other important factors for us to take into account when considering the national insurance fund.
	I reiterate a point that I believe I mentioned earlier: we have legislated to re-establish the link between the basic state pension and earnings. As I said, subject to affordability and the fiscal position, our objective is to do that in 2012, and in any event by the end of the Parliament.

Andrew MacKinlay: On 13 January, I stumbled across a copy of  The Wall Street Journal. An articled headed "Tehran's strip club" reported something that is widely known across the Atlantic in the United States but has not had much oxygen, or light shed on it, in the United Kingdom either in the media or in Parliament. Nevertheless, it relates to our security policy, and our attempts to combat terrorism and have high standards of banking.
	I discovered that Lloyds TSB had pleaded guilty to the Attorney General's Department in the United States to doing things in London to circumvent US sanctions against Iran. Not only  The Wall  Street Journal, but many other journals report that Lloyds TSB has entered into what is described as a deferred prosecution agreement with the US federal authorities, whereby it has already paid $300 million to those authorities by way of a fine. That was done not with a view to settling the matter, but to entering into an agreement with the federal authorities to make full disclosure of what is known in the industry as "stripping" in relation to money that came from Iran via London and got into the United States by the falsifying of documents in London. This is a very serious matter. The US Department of Justice and the district attorney concerned have done a favour not only to the United States but to the wider international financial community and us in the United Kingdom by detecting that operation.
	As I have said, there is no disagreement or debate about the matter. Lloyds TSB has acknowledged fully and unreservedly that it was involved in the practice. However, it made that declaration after being discovered. Lloyds TSB was certainly using the practice, which is illegal in the US, between 2001 and 2004, but never acknowledged that until being challenged after 2007. Indeed, in the period up to 2007, Lloyds TSB used similar practices in relation to moneys that came from Sudan, which were stripped here in London and then got into the US financial and banking system.
	What was the purpose of such a complicated process? I inquired about that. It would seem that Lloyds—and, regrettably, some other financial institutions here in London—helped Iran's rogue banks to infiltrate the US. The Iranians needed American dollars, sometimes to purchase things within the US borders, but also to channel other moneys through US banks to third countries or other parties demanding payment in dollars. All the evidence suggests that at least some of the money was destined to be used to purchase dual-use materials or technology, as part of the Iranians' desire to increase their weaponry and develop weapons, to the disadvantage of the international community.
	The system worked like this. The UK branches or subsidiaries of the Iranian banks would send electronic messages via what is described as the SWIFT banking payment system, which would go to Lloyds. Employees at Lloyds in London would then re-key the data into a new SWIFT message, carefully removing any reference to Iran or its banks. Employees at the British bank called the process "stripping", as I have already said. The US sophisticated screening operations and software would normally have flagged up concerns, but as the transfers came from a respected British financial institution, the alert system did not operate. As I have said, that is agreed ground, and Lloyds TSB has acknowledged it. The Iranians also benefited sometimes from overnight deposits in the US, taking advantage of favourable interest rates.
	The US authorities are now in a race to track down the ultimate destinations of those moneys and their precise origins. The district attorney's office has made it clear that he fears some of the funds
	"may have been used to purchase raw materials for long-range missiles."
	I also regret to tell the House that it is not just Lloyds TSB that is involved. Since starting to delve into the issue, I have discovered that Barclays is having to co-operate with both the US Department of Justice and the district attorney, apparently in relation to similar transactions. Regrettably, the Royal Bank of Scotland has indicated that ABN Amro, which it bought earlier this year with our money, is also being investigated by the US Department of Justice about a similar issue.
	On 21 January, I raised this matter at Prime Minister's questions, and the Prime Minister undertook to look into the matter and to write to me. I asked him how on earth this action could have been taken in London by Lloyds TSB, a British financial institution, to get around US sanctions, and how Lloyds TSB staff could have falsified documents—not my words; that is the admission—to get round those sanctions. Bearing in mind the fact that the United Kingdom has boasted about the need for a strict regime of banking transparency across the membership of the United Nations in order to combat terrorism, how could this have happened in the United Kingdom without there being a breach of UK law? I asked what regulatory bodies such as the Financial Services Authority, the Serious Organised Crime Agency, the Bank of England and the Treasury, and our security and intelligence services, had been doing about it.
	On 29 January, the Prime Minister wrote to me in reply to my questions. He said:
	"The position with regard to the penalty levied against Lloyds TSB is set out in the statement by the US Department of Justice of 9 January 2009. There is nothing further I can add in relation to the agreement reached between the US authorities and Lloyds TSB which is a matter between those two parties. You asked why the Bank has not been prosecuted in the UK regarding this matter. The US action against Lloyds TSB concerns past breaches of US sanctions. We can only prosecute in the UK in relation to breaches of UK law."
	In my view, the Prime Minister has missed the point. After 9/11, the United Kingdom led the call for transparency across the United Nations, and many of us are proud of the diligent work of Sir Jeremy Greenstock, the then United Kingdom ambassador to the UN, who led the sanctions committee. I had assumed, as had other hon. Members, that we had the most rigorous regime of scrutiny and oversight of our banking and financial sector, in order to frustrate illegal transfers across countries in breach of United Nations sanctions. I think that the Prime Minister still thinks that that is the case.
	I had assumed, because of all the posturing from the Dispatch Box by successive Ministers about Iran exporting terrorism, and Defence Secretaries acknowledging that many British soldiers had been killed by ordnance emanating from Iran, that significant sanctions were in place. For a long time, all of us—particularly Her Majesty's Government—have been concerned about Iran's desire to develop missiles and nuclear weapons to a point that we believe will threaten our interests. I find it fantastic that it is not in breach of United Kingdom law for officials at Lloyds TSB in London to falsify documents. Even if I am wrong about the sanctions and that none existed at the time, there must surely be an offence relating to the falsifying of documents.
	I am concerned that there is no indication of any attempt by the regulatory bodies to which I have referred to investigate this matter, or of any serious attempt to find the law in this matter. I felt, from the tone of his letter, that the Prime Minister went on to slap my wrists. He said:
	"Contrary to the assertion that you made in the House, the US case against Lloyds TSB has not involved accusations of money laundering. Therefore there is no suggestion that Lloyds TSB has contravened UK anti-money laundering legislation."
	I was slightly irritated by that, so I thought I would look up the definition of money laundering. I had assumed that it was quite an old term, but I found that it was apparently invented by  The Guardian newspaper at the time of Watergate, so it is a relatively recent one. Money laundering is, I discovered,
	"the practice of engaging in finance/financial transactions in order to conceal the identity, source and/or destination of illegally gained money".
	The Prime Minister's thesis is that at the time of this action, the UK did not have sanctions against Iran in place; apparently we have had them only since early 2007, which will no doubt feature in the Minister's brief. The Prime Minister thus seems to think that this is not a matter for the UK authorities, but I believe that money laundering is.
	Money laundering is something that has had to be combated—both in principle and, I think, in law—for a number of years. We are parties to an organisation known as the Financial Action Task Force on Money Laundering; it is based in Paris and is primarily known by its French name—Groupe d'action financière sur le blanchiment de capitaux. We signed in 1996—it was revised in 2003—and agreed to criminalise money laundering and to enable the authorities to confiscate the proceeds of money laundering. Countries are required to ensure that their banks
	"report certain suspicious financial activities to the appropriate financial regulators and law enforcement authorities."
	There is also something known as the suspicious activities report, to which even Members of Parliament are subject. Lloyds, of course, was hardly going to declare its own wrongdoing, but the UK has an obligation under FATF membership to bear down on such activities. That, however, we have singularly failed to do. Will the Minister kindly address that point in his reply?
	The biggest potential payoff is that Lloyds must now disclose fully to the US authorities all the details of these wire transfers originating in Iran and help the CIA and the FBI to track them to their final destinations. I would like to be assured, however, that, at least from now on, the UK authorities will say they also want full disclosure.
	Before I move on from the Financial Action Task Force, I want to emphasise the fact that it places a duty on banks to know their clients. Lloyds TSB has not used that as a defence in any case, but there is no doubt that the particular FATF agreement to which the UK is party requires us to ensure the highest standards of banking. The UK has clearly failed in that regard and we should be ashamed of that. It is acutely embarrassing to the UK, particularly to the Foreign Office, which, metaphorically speaking, beat around the head those states that were somewhat reluctant after 9/11 to adopt the required transparency.
	I probed and probed to the best of my ability on this matter, Madam Deputy Speaker, and I indicated to you that I felt that things had not been properly reported. I discovered through use of a computer that there had been one or two references to this issue in the UK press and in Parliament, which I shall allude to. In particular, I discovered that a man named Conal Walsh had written in  The Observer on 8 October 2006:
	"The Financial Services Authority is urgently scouring Britain's banking system for evidence of Iranian terrorism funding following an alert from the US authorities. The move comes after officials at the FSA were shown American intelligence indicating that suspicious Iranian funds were being funnelled through the City of London and other financial centres."
	Apart from that report of 2006, however, there is no indication that the agencies to which I referred earlier have really done anything. I think I am entitled to ask the Minister what—if the  Observer article was correct—the FSA found.
	On 26 June last year, the right hon. Member for Richmond, Yorks (Mr. Hague) asked the Chancellor of the Exchequer
	"what steps are planned to be taken through the Financial Action Task Force to ensure that certain Iranian banks cannot abuse the international banking system to support proliferation activities and terrorism."
	In her reply the then Treasury Minister, the hon. Member for Burnley (Kitty Ussher) actually referred to "anti-money laundering", which I thought quite interesting. She said:
	"The Financial Action Task Force... has expressed concern that the Islamic Republic of Iran's lack of a comprehensive regime for anti-money laundering and combating the financing of terrorism... represents a significant vulnerability within the international financial system."—[ Official Report, 26 June 2008; Vol. 478, c. 466W.]
	It was the Minister, not I, who referred to money laundering. Again, however, there was no indication of what was subsequently discovered.
	On 24 November, the right hon. Member for Richmond, Yorks asked the Chancellor
	"what assessment he has made of the implications for UK financial institutions of the decision by the United States administration to ban Iran from undertaking u-turn financial transactions"—
	apparently, that is the technical term for some of the activities to which I referred earlier—
	"involving US financial institutions."
	The new Minister, the hon. Member for Dudley, South (Ian Pearson), replied:
	"The U-turn licence enabled Iranian entities to have indirect access to the US financial system—including through UK financial institutions. Revocation of that license will mean financial institutions worldwide can no longer route payments for the benefit of Iran through the US."
	He added:
	"We are not aware that UK financial institutions made any significant use of the U-turn licence".—[ Official Report, 24 November 2008; Vol. 483, c. 951W.]
	Someone was, or is, asleep.
	Perhaps the Minister will confirm this later, but I should have thought that both morally and legally, under UK law and because of our international obligations, we had a duty to adhere to the best practices of international banking. Even if at the time of these practices by Lloyds TSB there was no Order in Council or statutory instrument making the activity specifically illegal in the United Kingdom, surely through our lack of intervention we were acquiescing in a serious breach of our international obligations.
	I have referred to the deferred prosecution agreement, which is a legal document. The agreement reached between the Department of the United States Attorney General and Lloyds TSB admits that from 2001 until 2004 Lloyds
	"falsified the business records of banks in Manhattan by engaging in a systematic process of altering wire transfer information"—
	in London—
	" to hide the identity of its clients."
	Lloyds had not owned up to that activity, although it had ceased to engage in it in 2004. It was rumbled only because in 2006 the diligent US authorities had embarked on an investigation of the relationship between the Government of Iran and two New York entities. It was during that investigation that they stumbled across evidence that Lloyds
	"was engaged in the illegal transfer of funds into Manhattan on behalf of sanctioned Iranian banks."
	Regrettably, it seems that they also discovered that other UK financial institutions might be involved in the practice.
	The authorities discovered that Iranian business men were looking for high-quality American electronics. They had to act stealthily. They sought special parts coveted by Iran and especially by those seeking to make roadside bombs to kill United States troops in Iraq. That seems to have been the position. When the US Attorney General was asked whether these moneys were being directed towards terrorism, he said, "Actually that's why we need the full disclosure. We want to know where this came from and where it was going to." If the United States has not, as of this afternoon, fully discovered and had declared to it the totality of this criminal act in the United States, what confidence can I have, as a Member of the House of Commons, that our FSA, our security and intelligence services, the Bank of England and the Treasury have the slightest notion of what has gone on? I have no confidence about that. All the evidence suggests that there has been wilful ignorance and a washing of hands on the part of these agencies.
	These were not random acts, nor were they a mistake; they were not undertaken by rogue individuals. It is indicative that Lloyds TSB knowingly set out to break out United States law and condones the action of a large number of its employees acting on its behalf. That could have happened only with the permission of people at the highest level. One internal Lloyds TSB document said that transactions from the London branches of Iranian banks should be processed in "the normal way", which meant removing information that would tie them to Iran—this is all according to the agreement that Lloyds has now entered into with the US authorities.
	Lloyds eventually dedicated specific employees to scrubbing the Iranian transactions—I think there was even an instruction book on how the employees dealt with that. One of the main questions on which the United States authorities are focusing is whether the money went to terrorism. I, too, want to know the answer to that, and I am entitled to know it, given that, apparently, I and others in this House have sent our armed forces into conflict situations where ordnance is coming from Iran.
	In summary, I ask the Minister to address the following points. Will he tell us precisely to what extent this has been examined by the Treasury, the Bank of England, the FSA, SOCA and our security and intelligence services? I guess that he will not tell us about the last of those, and that goes to the heart of the problems with this place—there is no oversight of the security and intelligence services. The ridiculous Intelligence and Security Committee is not a parliamentary Committee; we do not even know, and we not allowed to know, whether it is even trespassing on this issue. That is a further indication of why we need a proper parliamentary Committee. Perhaps we could also create a precedent—perhaps the Minister will indicate whether the Intelligence and Security Committee has looked at this. If it has not, will he invite it to do so?
	I have focused largely on Iran, but some $20 million came from the Sudan, through this process, to the US. As has been indicated, this practice went on until 2007—I do not know whether it is a coincidence, but that was when a statutory instrument was passed here. That was probably the cut-off point. It rather indicates that there was full knowledge of and consent about this grave matter by people at a certain level in Lloyds—they were watching all the time. I want the Minister to tell me specifically whether it is lawful for a UK bank to falsify documents in the UK—let us forget about the US on that particular point.
	Obviously, this was a systematic process; people were prepared to do this and it was sanctioned at the highest level in Lloyds TSB. One of the things that we have discovered over the past few weeks is that people do not do things for nowt—clearly, bonuses would have been paid to these people. I would like the Minister to say—if he would not mind—whether or not bonuses were paid to the staff and managers involved.
	Over the past three or four months, the sums of money that have been discussed in this place are beyond belief—not billions, but trillions—so a mere $300 million may appear small change. But to most of us, it is a very serious matter. That is the sum paid to the US authorities by Lloyds TSB as an interim payment. It is no exaggeration to say that that is our money, which is not to say that the US authorities were wrong to demand it. Therefore, we have a right to know what happened. There was criminal wrongdoing, and the response by the UK has been pathetic. I am disappointed with the Prime Minister—not because he wrote the letter, but because he should have told the Treasury that it had to look into what happened. I will not let him get away with washing his hands of this issue; it is a very serious matter. It makes us a laughing stock around the world, it will prejudice the reputation of reputable financial institutions in this country, and I look forward to the Minister's response.

Charles Walker: I congratulate the hon. Member for Thurrock (Andrew Mackinlay) on securing this debate and bringing this important matter to the attention of the House. I intend to make only a brief contribution.
	We live in a morally ambivalent age, and nothing will change that. But what on earth was a British bank doing, doing business with Iran? It was a shameful performance by Lloyds TSB. As the hon. Gentleman rightly points out, the $300 million fine is not coming from a magical printing press. It is shareholders' money and, as the taxpayer, we are the shareholders, so it is our money. We need to know exactly what was going on.
	All this happened a few years ago. Since then, we have had a bail-out of the banking sector, in which Lloyds TSB received the full endorsement of Government to take over HBOS, with this appalling act in the US hanging over its head. We can ask Lloyds TSB and its senior board members—they are still in place—how much money is enough. How much money do they need to make? Why did they do business with Iran? After all, we know full well that in Iran homosexual men are routinely murdered and hanged from cranes. Lloyds TSB makes great play of its corporate social responsibility. It claims to value its people. Well, in this matter, its corporate social responsibility does not amount to a hill of beans.
	As the hon. Gentleman so rightly pointed out, we do not know whether the transactions conducted via Lloyds TSB have resulted in the loss of life of young American men and women who are meant to be our allies and whom we are meant to support. Lloyds TSB still has a huge amount of explaining to do on this issue and I hope that the Minister can address those issues when he winds up.
	I do not expect the banking sector to be a paragon of virtue. Indeed, we have seen over the past year that it is very far from that. But it is one thing to make bets on derivatives and overseas mortgage markets. It is another to do business with the regime in Iran. Lloyds TSB not only did business with that regime, but actively falsified the evidence and covered it up. It cannot claim that an innocent mistake was made, or a rogue manager was responsible and the bank had no idea what was happening. It was sanctioned at the very highest levels of one of the UK's leading plcs. And at that time it was one of our leading plcs—it was probably one of the top large companies quoted on the stock exchange. Again, I agree with the hon. Member for Thurrock that that is of critical importance.
	The hon. Gentleman also highlighted the very important fact that Lloyds did business with Sudan as well as with Iran. Month in and month out, hon. Members and Ministers come to this place to express concern and disgust about what is going on in terms of the persecution of minorities in Sudan, yet one of this country's leading banks was doing business there. I imagine that Lloyds bank thought that it was a sweetener to secure further business. I do not know for sure, but I have strong suspicion that if the people involved had not been caught they would have continued to grow their business in Iran.
	I accept that there are issues to do with dual jurisdiction, and that we live in a global marketplace where there will always be conflicts and problems such as have been set out today. However, I shall conclude my brief comments by repeating my question of a few moments ago—that is, how much money is enough?
	I always thought that the people who run our major industries, and most politicians, were fundamentally decent people tasked with making hugely important decisions. A lot of people do not like the decisions that our leading business men and politicians take, but they put themselves in such leadership positions, and that means that they have to take difficult decisions and stand by them. The British people are fair minded: we may not like the decisions that are taken, but we recognise the right of the people involved to make those decisions and the reasons why they take them.
	However, I doubt that anyone in this country can fathom how probably decent people thought that it was legitimate to do business in Iran. On the scale of things, and compared to Lloyds' global portfolio, the amounts of money involved are quite small. It did business in Iran because it wanted to earn a little extra. Again, how much money is enough? How much profit did it need to make? Frankly, it is not surprising that our banking sector is in its current mess if such morally ambivalent people are in leadership positions.

Andrew MacKinlay: It is early in his response, but the Minister is uttering the spin given to him by Lloyds TSB and the Treasury. He says that the matter has been settled, but it will be final only if there is full disclosure. The settlement is contingent on Lloyds TSB coming up with the fine and full disclosure, but that process has not been concluded yet. The US authorities will draw a line under the matter only when they are satisfied that is has been concluded. I do not feel comfortable that some people involved in criminal activity might get off scot-free, but that has not been agreed yet. The deferred prosecution is precisely that—deferred.

Stephen Timms: The point that I want to underline is that the general licence allowed banks to conduct such transactions with Iran in those circumstances.
	The US Department of Justice's statement sets out that, between 1995 and 2007, Lloyds TSB, in both the UK and Dubai, made changes, as my hon. Friend has explained, to SWIFT messages—messages on the international worldwide funds transfer network, which are known in the US as wire transfers—worth more than US$350 million that involved principally Iran, but also Sudan, as he has mentioned, and, I understand, Libya as well. That involved removing payment originator information from some inter-bank payment instructions, so that payments would not be identified by US correspondent banks as originating from countries subject to US sanctions. The infringement related to removing originator information, rather than to the transactions themselves. That is quite an important point. The infringement had to do with the removal of that information.
	I understand that Lloyds TSB ceased removing payment originator information from Iranian transactions in 2003. I think that my hon. Friend said 2004; anyway, it was round about then. It is perhaps worth noting that the US banks did process the payments, even though the SWIFT messages did not contain originator information. My hon. Friend suggested that that was because they thought that if the payments were from a UK bank, everything must be fine. My hon. Friend said that ABN AMRO had also been doing such things, too. I was not aware of that; I do not know whether that is correct, but I have no reason to doubt it. It was not a UK bank at the time. There is at least a question that ought to be raised about how the transactions were processed by the US banks, even though the messages did not contain originator information.
	As we have heard, as a result of the breaches of US law, Lloyds has agreed to pay a fine of $350 million. Lloyds has notified the markets of that, and made provisions in its accounts last year for the payment of the penalty. Given its hedging arrangements, the £180 million provision in place in its accounts will, I understand, cover the full size of the penalty. It is important to stress that the US investigation is specific to breaches of US sanctions law; I know that my hon. Friend was concerned about that point. The US investigation does not allege that Lloyds TSB breached international sanctions, or that it facilitated terrorist finance, proliferation finance or money laundering. Indeed, the deferred prosecution agreement between the US authorities and Lloyds records that subsequent screening of the payments routed through the US between August 2002 and the time when the accounts were closed found no matches with names on the US terrorist or weapons of mass destruction watch lists. The US Department of Justice has acknowledged that Lloyds' co-operation with it has provided substantial assistance to the New York District Attorney and the Department of Justice.
	My hon. Friend, perfectly fairly, asks why no one has been prosecuted in the UK over the issue. As he says, he raised the matter with the Prime Minister on the Floor of the House on 21 January. He has anticipated the answer; it is that we can prosecute only for breaches of UK law, and not for breaches of US law. As I have set out, the US case against Lloyds TSB concerns breaches of US sanctions. I certainly have not seen evidence of breaches of UK law in this case. I have seen no evidence of breaches of international sanctions, money laundering rules or terrorist finance rules. That is consistent with the findings in the US case, which is specific to breaches of US sanctions.
	It is worth noting that the US imposed comprehensive financial sanctions on Iran after the Iranian revolution in 1979; we remember some of the circumstances. However, United Nations and European Union sanctions against Iran have been much more recent, and more targeted. Given the history of relations between the US and Iran, it is not a surprise that breaches of US-Iran sanctions did not necessarily amount to breaches of UK or European Union law.
	Given the concerns that my hon. Friend raised about the way in which changes were made to the messages, I shall say a little more about how international banking practice relating to the transparency of inter-bank payments has developed. Decisions on what payment information should be included in SWIFT messages has, in the past, been regarded as a commercial matter for the banks. The decision was dependent mainly on what was required, technically, to allow the SWIFT messaging system to be used successfully. However, new international standards for measures to counter illicit financing were introduced following the 11 September terrorist attacks. The Financial Action Task Force, to which my hon. Friend referred, made nine special recommendations on terrorist financing in 2001, one of which—special recommendation VII—covers wire transfers. It aimed to correct the lack of transparency in inter-bank payments, which was recognised as a potential weakness in the system. Special recommendation VII calls on countries to
	"take measures to require financial institutions, including money remitters, to include accurate and meaningful originator information...on funds transfers and related messages".
	That recommendation was agreed in 2001, and was followed up by technical work on how it should be implemented, which continued until 2005. Once the technical work was complete, the European Union decided to implement special recommendation VII at the Community level. That was done through the Transfer of Funds (Information on the Payer) Regulations 2007, known as the wire transfer regulation, which was taken forward during the UK presidency of the EU in 2005. Following an agreement by the Council of Finance Ministers in, I think, November 2006, the regulation came into effect in January 2007.
	The EU wire transfer regulation requires payments to contain complete information—name, address and account number—on the payer. To remove payment information, as was done in the case that my hon. Friend rightly highlighted, is not permitted under the regulation.
	Until the regulation took effect in January 2007, there was no requirement in UK or EU law for banks to provide full payer information. So the actions of Lloyds TSB involving transactions before January 2007 do not constitute breaches of UK or EU law. And, as I pointed out, Lloyds stopped removing payment information from Iran transactions in 2003, well before 2007 when the legal obligation to do so under UK law and EU law came into effect.
	Actions to tighten the law have been complemented by efforts by the banking organisations to raise standards of best practice. The Wolfsberg group of international banks has set out what it calls messaging practice standards to ensure that the payment system is not abused. Wolfsberg also acted to encourage SWIFT to make technical changes to the messaging system that will increase the amount of data that accompanies certain kinds of payment. Those changes are expected to come into effect at the end of 2009.
	In addition, the Basel committee on banking supervision has been considering the issue at the request of the international regulatory community, and will shortly publish its own statement on the steps that banks should take to increase transparency in international payments.
	Let me conclude by setting out the Government's approach to financial restrictions against Iran. We have been at the forefront of international efforts, in the Financial Action Task Force and the European Union, to strengthen controls on terrorist finance and to improve the transparency of inter-bank payments.